Rapid growth has pushed flexible workspace well and truly into the mainstream in Asia Pacific. Operators are expanding aggressively in virtually every major city, landlords are building flexible workspaces into their portfolios, and multinationals are incorporating flexible solutions into their real estate strategies.

The question is: where does flexible workspace go from here, and will it survive in its current form, as this one-time disruptor faces disruption itself? There are regulatory and industry trends working in the sector’s favour, but it also faces no shortage of challenges, from volatile property markets to the potential erosion of the energetic, innovative communities that fueled its early expansion. Based on extensive research and firsthand insights from some of the industry’s leading voices, this report explores the future of flexible workspace, and how changes to the sector are set to impact occupiers, landlords and operators across the region.

Aggressive expansion and increasing competition are driving continued evolution in the flexible workspace sector as operators and landlords strive to distinguish their offerings, and occupier demands change. The industry is also contending with threats and opportunities, both internal and external, including changes to lease accountancy that may encourage more large companies to migrate to flexible workspaces. This will encourage the development of alternative leasing models that blend flexible and traditional spaces in innovative ways, with significant implications for regional markets and working environments.

Expansion and competition drive continued evolution

Continued Evolution

In a fast-expanding, increasingly crowded sector flexible workspace operators and landlords are steadily building out their solutions to the point that some workspaces are transforming into fully integrated lifestyle environments, boasting health, entertainment and other facilities. Operators are also increasingly conscious that many occupiers are attracted to the less tangible aspects of a space--particularly the innovation, creativity and opportunities for collaboration that spring from dynamic communities.

“Landlords need to be able to create communities in their buildings as space is only one aspect of what occupiers want.” --Jonathan Seliger, CEO, naked HUB

As the flexible workspace industry evolves, it is both supported by and under pressure from market trends, changing regulations and shifts in the composition and expectations of end-users. How operators, landlords and occupiers respond to these realities will dictate the industry’s development going forward.

Landlord interest in the sector is growing, presenting dedicated flexible workspace operators with a new source of competition. However, in developing flexible workspace brands, landlords are also struggling to achieve the right mix of space in their portfolio and the necessary economies of scale. The solution is likely to be found in partnerships, with more landlords and operators collaborating to complement each other’s core strengths and push new concepts forward.

Multinational corporations taking up flexible workspace are increasingly seeking only flexibility of lease term and less interested in community and innovation; operators must work harder to educate their members to encourage these end-users to take an active part in their communities otherwise flexible workspace locations could simply become repackaged office buildings with occupiers existing in silos.

Regulatory changes encourage multinationals to take fewer long-term leases and rely more on flexible workspace

Lease Accountancy

New accounting standards will require businesses to disclose their leasing commitments and this could spur demand for flexible workspace as occupiers act to keep debt off their balance sheets--but the tradeoffs may not be as straightforward as they initially appear.

Regulatory changes should have a positive impact on the flexible workspace sector, pushing multinational corporations to take less core space on traditional long-term leases and rely on flexible workspace operators to provide the flexible space to deal with temporary headcount swings. However, a multinational corporation taking on a three-year deal for customised space within a flexible workspace location is unlikely to be able to pass this off as a membership, and therefore this will still need to be accounted for.

City Campus model allows access to flexible workspace across markets and internationally

Alternative Leasing Models

Flexible workspace is enabling innovative leasing models that reflect the increasingly dynamic and decentralised nature of business. In the flex and core approach a company combines a long-term lease with a traditional landlord for its core space and an agreement with a flexible workspace operator to accommodate sudden changes in headcount. This allows firms to deploy additional resources for projects or surges in demand with minimal overheads.

The dollar value of flexibility, mobility and the opportunity to flatline capex through the term means that (the flex and core) leasing model is becoming increasingly attractive.

The city campus model allows businesses to expand quickly across cities or even international borders by supplementing a central location or headquarters with a digital platform that allows staff to access temporary hot desks or private offices across a number of flexible workspace locations, on an as-needed basis.

While (the city campus) model has been adopted tentatively so far, we are expecting the model to be extremely popular with sales and client-facing teams.

LanDlords

Don Taylor, Director, Office, Swire Properties

“The increasing proportion of millennials in the workforce and the integration of more advanced technology into the workplace is driving demand for a better user experience. Occupiers’ expectations are higher and landlords need to respond.”

Matthew Chisholm, Director, Flexible Workspace, Ascendas-Singbridge

“The trade-off between providing amenities versus making money in a landlord-operated space means that significant short-term investment is required in building a platform with the space, technology resources and programming to reach long-term performance goals.”

OPERATORS

Christian Lee, Asia MD, WeWork

“Companies of all sizes are beginning to understand that their employees need spaces and connections that empower them to collaborate and innovate. As a result the demand for our space community, and services from multinationals is increasing at an exponential rate. We believe we’re only scratching the surface.”

Carlson Lau, CEO, EV Hive

“Indonesia has many unique characteristics that make it an amazing market for flexible workspace operators.”

Todd Liipfert, Development Director, The Executive Centre

“Flexible workspaces are about so much more than just the four walls of an office - we exist to serve the way businesses succeed, connect and thrive.”

Jaelle Ang, CEO, The Great Room

“We strive to create a truly hospitable ambience - unlike so many rough-and-ready, concrete-and-steel spaces, where you do your job nine to five, get in and get out as swiftly as possible.”

Interviews

Don Taylor, Director of Office at Swire Properties, speaks to Colliers about how landlords and external Flexible Workspace operators integrate to provide curated offerings to tenants.

Todd Liipfert, Senior Development Director at The Executive Centre, speaks to Colliers about why companies are increasingly seeking flexible workspace as part of their real estate strategy

Turochas “T” Fuad, Managing Director of WeWork Southeast Asia, speaks to Colliers about WeWork’s expansion plans, what matters most to the millennial workforce when it comes to workspace and the future of work.

Elaine Tsung, Founder & CEO of GarageSociety, speaks to Colliers about what end users are looking for when seeking flexible workspace, the importance of community when it comes to co-working and how to maintain it.

“I think we’re seeing big shifts in the industry.. really important to have technology solutions and to provide better amenities for people in the space,” Richard Paine, Managing Director of Paya Lebar Quarter of Lendlease, tells Colliers about trends that are reshaping the flexible workspace sector.

market snapshots

Hong Kong

46 flexible workspace centres with an average desk cost of USD1,100/month

At least 400,000 sq ft expected to be transacted by flexible workspace operators in Q1 2018, versus approximately 350,000 sq ft for all of 2017

Over 90% of Hong Kong’s top 200 occupiers considering flexible workspace as part of real estate strategies